Asia Stocks Drop on Fed; H-Share Index Enters Bear Market

A pedestrian walks past an electronic stock board Tokyo. The MSCI Asia Pacific Index slipped 4.7 percent this year through yesterday, when shares on the gauge traded at 12.6 times estimated earnings. Photographer: Kiyoshi Ota/Bloomberg

March 20 (Bloomberg) -- Asian stocks fell, with a gauge of
Chinese shares in Hong Kong entering a bear market, after the
Federal Reserve signaled it may raise U.S. interest rates from
the middle of next year.

Newcrest Mining Ltd., Australia’s biggest gold producer,
slumped 7.9 percent after bullion dropped the most in three
months as the Fed’s announcement curbed demand for havens. China
Mobile Ltd. dropped 3.6 percent to its lowest price since April
2009 in Hong Kong after the world’s largest phone company posted
profit that missed estimates. BYD Co., the electric-car maker
backed by Warren Buffett, tumbled 14 percent in Hong Kong after
projecting lower-than-expected first-quarter profit.

The MSCI Asia Pacific Index sank 2.1 percent to 131.86 at
7:24 p.m. in Hong Kong, its lowest close since Feb. 6. More than
five shares fell for every one that rose on the gauge. The Fed
yesterday said its key rate, currently near zero, would be 1
percent by the end of 2015 and 2.25 percent a year later.

“We’re going to see more follow-through selling in Asia,”
Toby Lawson, head of futures, options and cash equities trading
for Asia Pacific at Newedge Group SA in Sydney, said by phone.
“It’s significant that the Fed fund rate will rise to 1 percent
by the end of 2015. We could see capital outflows from emerging
markets back into the U.S., especially given residual concerns
about China’s economy slowing.”

The Shanghai Composite Index fell 1.4 percent to its lowest
since Jan. 20 as Goldman Sachs Group Inc. cut the growth outlook
for China. The government will accelerate measures to stabilize
growth and allow property companies to raise money through share
sales for the first time since 2010 after a closely held
developer collapsed this week.

Stimulus Outlook

Futures on the S&P 500 slipped 0.2 percent today after the
U.S. benchmark index fell 0.6 percent yesterday. The central
bank’s bond-buying program, which was reduced by another $10
billion to a $55 billion monthly rate, will be wound down by
year-end with a rate increase to follow within six months, Chair
Janet Yellen indicated.

Yellen said the quantitative-easing program used to
stimulate the U.S. economy would end this fall should the
central bank continue to taper in measured steps. There will be
“considerable time” between the end of the stimulus and the
first rate increase, meaning “six months or that type of
thing,” she said.

Most Federal Open Market Committee participants reiterated
their view that rates will be held at current levels until 2015.
The median forecast for rates among 16 Fed officials rose from
December, when they estimated the rate at the end of next year
at 0.75 percent, and 1.75 percent for the end of 2016. Officials
said they will look at a wide range of data in determining when
to boost borrowing costs, dropping a pledge tying interest rates
to a 6.5 percent unemployment rate.

Hawkish Fed

“The FOMC was more hawkish,” said Anthony Valeri, a
market strategist with LPL Financial Corp. in San Diego, which
oversees $350 billion. “The expectation for higher rates got
pushed forward and the bond market was not priced for that.”

The U.S. and Europe are moving to increase sanctions on
Russia after President Vladimir Putin signed an accord setting
in motion Crimea’s accession to Russian territory. With visa
bans and asset freezes on Russian officials failing to sway
Putin, European Union leaders meet today to consider their next
move.

Ukraine ordered the removal of its military from the
majority Russian-speaking Crimea and said it will strengthen its
deployments on the country’s border with Russia.

Gold Producers

China Mobile fell 3.6 percent to HK$67. Net income
retreated 16 percent to 30.2 billion yuan ($4.8 billion) in the
fourth quarter, according to figures derived from full-year
results released by the Beijing-based company today. That missed
the 33.4 billion-yuan average of three analyst estimates
compiled by Bloomberg.

Myer Holdings Ltd. slid 5.3 percent to A$2.52 in Sydney,
its biggest decline since May. The department-store operator
said its second-half gross operating-profit margin will be flat
compared to a year earlier. The company had forecast an
improvement in September.

BYD tumbled 14 percent to HK$47.60 to lead losses on the H-share index. The carmaker projected first-quarter net income of
as much as 15 million yuan, which Nomura Holdings Inc. said was
lower than expected.